Our Brexit FAQs
After three years, much of our pre-Brexit preparations are complete. We extended the regulatory permissions of our Luxembourg entity to ensure we are able to continue existing business relationships in the EU/EEA with minimal disruption to clients and counterparties. We have also taken the opportunity to consolidate the existing EU management company operations in Ireland and Luxembourg within a single structure in Luxembourg, recognising there were efficiencies to be gained in terms of infrastructure, resources and capital.
We continue to maintain a dedicated Brexit programme and work streams focused on identifying any likely service-level disruptions and to recommend contingencies to mitigate disruptions. We have also been liaising with our Investment Management delegates to determine what areas of impact to contracts with EU counterparts and the extent these will need to be novated in the event of a ‘hard’ Brexit. As we have existing service offerings across Europe, as well as in the UK, we consider it a priority to maintain service levels throughout this process.
BNY Mellon Investment Management is in a strong position to manage the effects of Brexit on our business and on our clients. We have a strong presence in both the UK and the European Union (EU) and operate two flagship UCITS umbrella fund ranges: BNY Mellon Global Funds plc (BNYMGF), domiciled in Ireland, and BNY Mellon Investment Funds (BNYMIF), domiciled in the UK.
Distribution of our UK-domiciled funds, BNYMIF, to UK clients is expected to be unchanged through 2020, along with the distribution of the EU UCITS umbrella, BNYMGF, to UK clients.
The UK is entering an implementation period – ending 31 December 2020 – during which it will negotiate its future relationship with the EU. During this period EU law will continue to apply in the UK and existing passporting rights will carry on.
The FCA has published further information concerning the UK Government’s temporary permissions regime (TPR), which aims to ensure EEA investment firms and funds currently operating in the UK under the existing EU passport mechanisms can continue to do business as they did prior to Brexit. The UK regulator has confirmed the TPR will enter into force at the end of the implementation period with an expected duration of three years.
During the TPR period there will be an opportunity to apply for full authorisation (firms) or recognition (funds) in the UK and it continues to our intention to do so. The board of our Dublin-domiciled range, BNY Mellon Global Funds plc, has already approved participation in the TPR and notification was made on 1st March 2019.
At this stage we have not identified any incremental costs or charges in respect of management and administration, which would be borne by the sub-funds as a result of Brexit. In the event that there are incremental costs and charges arising, these would be disclosed to investors in accordance with the relevant regulations.
However, it should be noted there are certain transactional costs to which the sub-funds are subject, such as market spread, that are driven by markets and to the extent such costs may increase as a result of Brexit is obviously beyond the control of the Manager / Investment Manager.
Liquidity of all sub-funds are constantly reviewed to ensure portfolios are being managed in line with the redemption terms offered. To date no major issues have been identified from this analysis.
We believe we have taken appropriate steps to put the necessary infrastructure in place to minimise any disruption for both our UK and European clients. We have expanded our European presence, building on our existing offices. We are now using our existing management company in Luxembourg to support our business operations within the EU/EEA, having extended the regulatory permissions of this entity to ensure we were able to continue to fully service our European client base.